--- title: "Avoiding Risk While Driving Returns: A Sustainable Investing Strategy Most Investors Overlook" description: Sustainable investing protects returns by identifying hidden liabilities and backing robust companies that can deliver sustained long-term growth. image: https://blog.reyndersmcveigh.com/hubfs/brown-bear-alaska.jpg --- [![horizontal](https://blog.reyndersmcveigh.com/hubfs/horizontal.svg "horizontal")](https://reyndersmcveigh.com/) - [About](https://reyndersmcveigh.com/about) - [Who we are](https://reyndersmcveigh.com/who) - [Our Team](https://reyndersmcveigh.com/team) - [Contact](https://reyndersmcveigh.com/contact) - [Careers](https://reyndersmcveigh.com/careers) - [Services](https://reyndersmcveigh.com/services) - [Investment Management](https://reyndersmcveigh.com/investment-management) - [Financial Planning](https://reyndersmcveigh.com/financial-planning) - [Sustainable Investing](https://reyndersmcveigh.com/sustainable-investing) - [Insights](https://blog.reyndersmcveigh.com/insights) - [Forms](https://reyndersmcveigh.com/compliance) - [Form CRS](https://reyndersmcveigh.com/crs) - [Form ADV](https://reyndersmcveigh.com/s/2024-06-18-ADV-Part-2A.pdf) - [Mutual Fund](http://www.reyndersmcveighfunds.com/) [Log In](https://reyndersmcveigh.sharefile.com/Authentication/Login) [Log In](https://reyndersmcveigh.sharefile.com/Authentication/Login) Oct 29 # Avoiding Risk While Driving Returns: A Sustainable Investing Strategy Most Investors Overlook ## Key Takeaways - Sustainable investing protects and grows returns: long-term risk management does not mean sacrificing performance. - Reynders, McVeigh leverages deep qualitative and quantitative research  to uncover hidden liabilities conventional analysis often misses. - Hidden liabilities threaten business value: stranded assets, “forever” chemicals, microplastics, and unsustainable pricing can erode future earnings. - Wall Street ESG strategies often leave investors exposed to unpriced risks in index-like portfolios. - Sustainable companies are built to endure with strong balance sheets, resilient operations, and competitive advantages that weather market, technological, and environmental shifts. Many investors think of sustainability as a feel-good initiative — something separate from the rigorous financial analysis that produces strong investment returns. We see it differently. At its core, sustainable investing is risk management. It’s about recognizing long-term threats to business value that standard financial analysis often misses. From stranded assets in the fossil fuel industry and forever chemicals in consumer products to microplastics in apparel and unsustainable pricing policies at pharmaceutical firms, some liabilities aren’t obvious simply by looking at a company’s formal accounts. But they can jeopardize future earnings, erode competitive advantage, and trigger sudden write-offs. Sustainable companies carry fewer liabilities and are built to endure. They navigate market swings, technological shifts, and environmental changes with resilience. Well-managed and strategically positioned, they offer products and services that benefit their customers, backed by strong balance sheets, a competitive edge, and a solid track record of long-term growth. Good companies can make for great investments—sometimes spectacularly so. Equities in our global sustainable balanced composite fund, for example, returned 528% after fees from January 2006 to June 2025. The leading global index, the MSCI World Index, returned 363% over the same period. Disciplined sustainable investing outperformed by more than 150% during that same time. Past performance is no guarantee of future results, but it does show what prudent, disciplined sustainable investing can achieve.   [![ON-DEMAND WEBINAR Learn more about hidden liabilities in our webinar: Rethink Sustainable Investing  ](https://no-cache.hubspot.com/cta/default/48422570/interactive-198660712721.png)](https://blog.reyndersmcveigh.com/hs/cta/wi/redirect?encryptedPayload=AVxigLLWYE55ZaIOxm8195L0h%2BFXIKXHkAPww6jHxarN4Ftp%2F6qbuJJGyHelmJeN7nGiR4lXYxhOvAV9WHNDrv8TkGaP46EejDUaYh3TjGz6%2B0CaL0VJVYDk%2FJajfKc88FBdkCxZmbXpx7Wvz6IGXuZLahvRm8S4rutj%2FbhqThMj%2FlLQh%2BeRzoKfpq5nYGbWA05ygR1IMnHBdSy9YAvZMHaEHbAfH9M1icj%2BDZ%2FdbTZY%2FIoFAhKv&webInteractiveContentId=198660712721&portalId=48422570) ### Analyzing through the lens of sustainability is hard. That’s why few do it So why don’t more fund managers pursue true sustainable investing? Because it’s difficult. It requires managers to step out of their traditional investing framework. They must assess an array of qualitative factors as well as quantitative data, and most firms are not willing to do that. Many fund managers rely on third-party ESG scores or screening services rather than conducting their own research. And while these scores can be useful tools, without deeper analysis, they miss the nuances that separate a company that merely looks sustainable from one that truly is. Even Benjamin Graham, who helped define modern security analysis, recognized [the challenge of assessing qualitative factors](https://blog.reyndersmcveigh.com/insights/qualitative-analysis-the-lesson-benjamin-graham-didnt-teach). In the book *Security Analysis*, published in 1934, he acknowledged that evaluating a company’s qualitative aspects is difficult. But Wall Street seems to have interpreted that as a license to skip it. For decades, much of the market has done just that. ### Know what you own and why you own it Knowing what you own and why is the foundation of sustainable investing. It’s also the foundation of good investing. At Reynders, McVeigh, we rip through balance sheets and income statements during our quantitative analysis to understand companies down to their foundations. We check filings for opacity, track where revenues come from, and identify off-balance-sheet exposures. During our qualitative research, we assess management’s integrity and commitment to sustainable practices. We talk to them about environmental risks, social impact, and governance structures, and examine their 10- and 15-year plans. Then we integrate those insights into our quantitative framework. Consider two paper manufacturers on different rivers. Both produce chemical effluent during bleaching. One company hires lawyers to defend continued discharge. Earnings stay steady, and Wall Street sees no problem. The other invests millions in an enzymatic process to eliminate effluent entirely. Earnings drop that quarter, but the company has eliminated a long-term liability and improved its competitive position. We’d always choose the second company — the one reducing long-term risk and strengthening its long-term competitive position. ### Sustainable investing has weathered some mighty storms Markets have tested every investment philosophy over the past two decades, from the Great Financial Crisis to the COVID-19 pandemic. Through each period, our approach to sustainable investing has demonstrated its value. During the pandemic, when stock markets around the world slumped, our portfolios reflected the discipline and durability that define our approach. We weathered the Great Financial Crisis by limiting our exposure to banks and owning financial services firms with low-debt transactional businesses. Over-extended balance sheets and opaque revenue sources at many of the banks were signs those businesses were not sustainable. Throughout the natural resources boom fueled by China’s rapid growth in the early 2000s, we disagreed with the common narrative that demand for oil was going to soar. Instead, we saw signs that the oil industry was in structural decline. Today the oil and gas sector represents only a fraction of what it did two decades ago. Our [sustainable investing approach](https://reyndersmcveigh.com/sustainable-investing) directs capital to companies that deliver robust long-term growth. We invest in companies replacing aging water infrastructure, innovating in medical technology, automating industrial processes, and meeting the growing demand for healthier products. These companies have strong balance sheets, transparent operations, and competitive advantages that allow them to compound through market upheavals and deliver sustained returns over decades. We avoid fossil-fuel producers, over-leveraged lenders, and businesses exposed to product risks such as forever chemicals and microplastics. In the pharmaceutical and biotech space, we are equally discerning, favoring firms with genuine innovation over those dependent on price increases to drive earnings. Sustainable investing doesn’t require investors to accept lower returns. It seeks to preserve and enhance long-term value by identifying risks that can erode business performance and by allocating capital to companies demonstrating sustainable practices. --- **Performance (as of June 30, 2025)** | Period | RMCM Global Sustainable Balanced (Equities Only) Composite (Net) Cumulative | MSCI World Index (Net) Cumulative | | --- | --- | --- | | 1 Year | 9.75% | 16.26% | | 5 Year | 64.70% | 97.24% | | 10 Year | 179.54% | 175.33% | | Since Inception (01/01/2006) | 528.21% | 363.41% | ***Important Disclosure*** *This blog post is for informational purposes only and should not be considered investment advice or a recommendation to buy or sell any security. Reynders, McVeigh Capital Management, LLC (“RMCM”) is a registered investment adviser. Registration with the U.S. Securities and Exchange Commission does not imply a certain level of skill or training. Commentary is provided for illustrative purposes and should not be relied upon as a forecast. Past performance is not indicative of future results. The views expressed are those of RMCM at the time of publication and may change without notice.* *The performance information shown above represents past performance and does not guarantee future results. Investment returns and principal values will fluctuate, so investors’ shares, when redeemed, may be worth more or less than their original cost. Current performance may be higher or lower than that shown. The MSCI World Index (Net) is a free float–adjusted market capitalization weighted index designed to measure the equity market performance of developed markets.* *RMCM integrates Environmental, Social, and Governance (“ESG”) criteria into its investment process as part of its commitment to social responsibility and ethical action. The use of ESG criteria may cause certain securities to be excluded for nonfinancial reasons, which may result in portfolios performing differently—either better or worse—than those not managed according to such principles.* *All information is obtained from sources believed reliable, but accuracy and completeness cannot be guaranteed. RMCM assumes no obligation to update any information contained herein.* - ## [Patrick McVeigh for The Wall Street Transcript on long-term, fundamentals-first investing in the age of A.I.](https://blog.reyndersmcveigh.com/insights/patrick-mcveigh-for-the-wall-street-transcript-on-long-term-fundamentals-first-investing-in-the-age-of-a.i) - ## [The Long Run October 2025](https://blog.reyndersmcveigh.com/insights/the-long-run-october-2025) © Reynders, McVeigh Capital Management 10 Post Office Square, Suite N1010 Boston, MA 02109 Phone: 617.226.9999 Fax: 617.226.9998 - [About](https://reyndersmcveigh.com/about) - [Services](https://reyndersmcveigh.com/services) - [Sustainable Investing](https://reyndersmcveigh.com/sustainable-investing) - [Insights](https://reyndersmcveigh.com/insights) - [Mutual Fund](http://www.reyndersmcveighfunds.com/) - [Form CRS](https://reyndersmcveigh.com/crs) - [Form ADV](https://reyndersmcveigh.com/s/2026-03-31-Form-ADV-Part-2A.pdf) Important disclosures. Views expressed within Insights are those of the authors as of the time of publication; such views are subject to change at any time based on market or other conditions. These views are not intended to be a forecast of future events or a guarantee of future results and may not be relied upon as investment advice. The information contained herein has been prepared from sources believed reliable but is not guaranteed by us as to its timeliness or accuracy, and is not a complete summary or statement of all available data. This is not a recommendation to buy or sell the securities mentioned. Any securities mentioned were selected on an objective basis for illustrative purposes and do not represent all of the securities purchased, sold or recommended. It should not be assumed that investments in any securities mentioned has been or will be profitable. The securities do not represent all of the securities purchased, sold or recommended for advisory clients.Past performance is no guarantee of future results. Every investment carries the potential for both profit and loss. Past performance is no guarantee of future results. Every investment carries the potential for both profit and loss. By clicking on hyperlinks, you are leaving the Reynders, McVeigh website and entering a third-party site. 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